A panel cointegration analysis of linkages between international trade and tourism: case of India and South Asian Association for Regional Cooperation (SAARC) countries

Abstract

The study is undertaken to examine international trade and tourism nexus in case of India and SAARC countries. To achieve the objective, panel cointegration is employed over the period of 22 years (1997 to 2018). The results from both first and second generation cointegration tests indicated the existence of long run equilibrium among tourism, export, and import. Albeit there are differences between short-term and long-term associations, the findings from autoregressive distributed lag approach indicates strong long-term linkages between trade and tourism. A possible channel of exports exerting a positive influence on tourist arrival is that the products in foreign markets increase the recognition and image of a country eventually leading to more tourists. Moreover, increased exports are expected to increase business trips further increasing the leisure trips and hence a strong linkage between export and tourism. On the other hand, a possible explanation of positive effect of imports on tourism could be that the destination countries which provide tourists with products according to their home taste encourage tourists to travel to these countries. The findings provided in the paper have strong implications for expanding India’s tourism footprint in the region.